Older litigation by EIH shows how banks that assist sanctioned Iranian businesses maintain pressure on EU legal structures
A 2015 legal appeal by Europäisch-Iranische Handelsbank (EIH) against the European Council brought to light the persistent strategies used by state-linked Iranian businesses operating in Europe to navigate and challenge sanctions.
In Europäisch-Iranische Handelsbank AG (EIH) v. Council of the European Union (Case T-259/13), the General Court of the European Union issued a judgment in 2015 concerning the placement of EIH, a Hamburg-based bank, on the EU’s sanctions list. The case focused on whether EIH’s inclusion in restrictive measures imposed on Iranian entities was justified under EU law, given EIH’s alleged involvement in financial transactions that supported Iran’s nuclear and ballistic programs.
Background
EIH, a German bank with ties to Iranian interests, was placed on the EU’s sanctions list under restrictive measures that targeted entities believed to be supporting Iran’s nuclear activities. The Council of the European Union argued that EIH had provided financial services that indirectly supported these activities, justifying its inclusion on the list. This designation severely restricted EIH’s ability to conduct business within the EU, as assets were frozen and transactions with the bank were limited.
Arguments and Claims
EIH contested its designation, arguing that its activities were lawful under EU regulations and that its operations did not specifically support nuclear proliferation. The bank also argued that the sanctions caused it significant financial harm and challenged the evidence used by the Council to justify its inclusion on the list.
The Court’s Findings
The General Court ruled in favor of EIH, annulling the Council’s decision to include the bank on the sanctions list. The Court found that the evidence presented by the Council was insufficient to demonstrate that EIH had directly or indirectly contributed to Iran’s nuclear program. The judgment highlighted the need for substantive and specific evidence to justify sanctions that could disrupt business operations and reputations.
Outcome
The ruling removed EIH from the EU’s sanctions list and underscored the importance of procedural fairness in imposing restrictive measures. It reinforced that the Council must base such measures on clear, precise evidence of involvement in proscribed activities.
This case has since been cited in other litigation concerning EU sanctions, as it reinforced the legal standards required for sanctioning entities within the EU.
EIH Overview
Described by sanctions watchdogs as a conduit for financial transactions between the EU and Iran, EIH has been at the center of several legal disputes, including EIH v. Nexi Payments Spa in Italy in 2022 and Europäisch-Iranische Handelsbank v. Council in 2015.
The U.S. Treasury’s Office of Foreign Assets Control (OFAC) reports that EIH has helped several Iranian banks find alternative ways to complete transactions blocked by EU sanctions. EIH has acted as the advising and intermediary bank in deals with sanctioned Iranian entities. For instance, in August 2010, EIH froze the accounts of EU-sanctioned banks Saderat Iran and Bank Mellat at its Hamburg branch but then resumed Euro-denominated transactions for these banks by using accounts held with an unsanctioned Iranian bank.
Sanctions watchdogs further allege that in August 2010, EIH was setting up a system to enable payments to reach Bank Saderat London and Future Bank Bahrain while avoiding EU sanctions. By October 2010, EIH continued facilitating payments for EU-sanctioned Iranian banks, including Bank Mellat and Bank Saderat, using Iran’s Bank of Industry and Mine as a channel. In 2009, EIH helped Post Bank in a sanctions evasion scheme by handling transactions for UN-sanctioned Bank Sepah. Bank Mellat is also a parent bank of EIH.